You’re Out

Kurt von Hammerstein-Equord, Commander-in-Chief of the Reichswehr, used the following classification system:

I divide my officers into four classes; the clever, the lazy, the industrious, and the stupid. Each officer possesses at least two of these qualities. Those who are clever and industrious are fitted for the highest staff appointments. Use can be made of those who are stupid and lazy. The man who is clever and lazy however is for the very highest command; he has the temperament and nerves to deal with all situations. But whoever is stupid and industrious is a menace and must be removed immediately!

Some years ago, Aaron Haspel had a post about “Chet,” the “prototypical Wall Street guy” and says of him:

Chet the i-banker regularly spends his weekends drafting prospectuses; Chet the bond salesman often arrives at his office at 3 or 4 AM to trade the foreign markets. What time do you start work? Chet can probably do bond math and explain Black-Scholes. Can you? You have opinions on Wittgenstein, which Chet lacks; are you quite sure the opinions are worth having? Chet is not brilliant, to be sure; neither are you. Brilliant people produce brilliant work. Where’s yours?

And then concludes, “Chet makes a lot more money than you because Chet is worth a lot more money than you.”

As you can see from events of the last few weeks, Chet has not been creating much value recently. In fact, in a short time Chet has possibly destroyed more value worldwide than most events this side of nuclear warfare. Chet may be intelligent and hardworking, but Chet either didn’t see where the financial instruments that have led to this catastrophe would lead or didn’t care. Chet, in short, is stupid and industrious.

Well, with all the bailout packages, injections of liquidity and equity stakes taken out by the government, Chet – bless his heart! – now works for me. Here’s my first and last message to Chet: you’re fired. Immediately and permanently.

If stupidity was criminal, Chet would be on Death Row. Much as I would like to take away all Chet’s ill-gotten gains, that would be time-consuming and expensive. So this is the sentence the American taxpayer should be handing down to all the Chets out there: we’re going to take away your livelihood. You’re out, never again permitted to handle any money other than your own. That includes working retail, by the way.

Did you create or sell mortgage-backed securities? Out. Did you underwrite such? Out. Have anything to do with relaxation of lending standards? Out. Leverage your balance sheet to the max? Out. Hold any position with Fannie and/or Freddie other than maintenance or secretarial? Out. Sell houses based on subprime loans? Out. Devise or promote NINJA loans? Out. And so on.

There’s no hole deep enough to drop Chet down, but at least we can make sure that he doesn’t do any more damage to the taxpayer. My only concern about Chet is that he’ll go into consulting, telling companies how to fire swaths of employees due to the poor economic conditions caused by his own malfeasance.

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